Shopping has transformed over the years. To remain competitive in today’s market, businesses around the globe have learned to leverage both physical and digital stores. They have also started integrating technology into their business models to better meet consumer demands, and some have even adopted an omnichannel approach to further improve returns.
Digital vs. Physical Store: What’s the Difference?
A physical store refers to a traditional brick-and-mortar location that customers can visit. These stores, such as retail locations, conduct sales on the premises, which the company leases or owns.
A digital store refers to an e-commerce site. It involves managing a business, including inventory control and transactions, on the internet. The most prominent example of a digital store is Amazon.
Digital stores are increasing in popularity as more consumers choose to do their shopping online. However, both options have pros and cons.
4 Pros of a Physical Store:
- Builds customer loyalty: When customers can visit a store, they start to build loyalty. They get to know the employees and feel a connection to the company’s brand. Ultimately, this helps businesses improve product sales.
- Allows customers to interact with products: On-site inventory management permits customers to test the products they are considering purchasing. They can see what they look like and how they perform.
- Promotes immediate sales: When consumers visit a store, their chance of purchasing an item is greater than that of customers visiting a virtual location. Since the shopper is physically on-site, they can also purchase additional, last-minute items. However, when shopping online, consumers tend to save items in their cart for later.
- Offers convenience: A high portion of physical store sales are due to their convenience. For example, if someone needs to run out and grab carpet cleaner, they can go to their local retailer. The need for convenience is why people will never rely solely on e-commerce shopping.
3 Cons of a Physical Store
- Limits customer base to local shoppers: Physical stores require people to visit in person, which means the customer base is composed primarily of individuals living within a specific store radius. If an economic downturn in the neighborhood occurs, stores can be negatively impacted.
- Costs more for operations: Brick-and-mortar locations require high overhead – companies must pay for both the commercial space and employees who work within the store. This can have a significant impact on profit-and-loss statements.
- Makes scheduling more challenging: Physical stores require staffing and can only sell items during open hours. These limitations require more workers while reducing potential sales.
4 Pros of a Digital Store
- Allows selling around the world: A digital store can sell to any customer worldwide, so long as shipping is available. This increases potential profits since the business is not limited to one area or demographic.
- Includes dropshipping: Dropshipping has become increasingly popular over the years. It refers to sending items directly to customers from manufacturers. By using dropshipping, businesses do not have to locate and reserve space for storing inventory. This promotes more sales while reducing overhead costs.
- Decreases barriers to entry: With today’s available resources, almost anyone can start a digital store. Unlike physical stores, owners only need to gain access to inventory and shipping.
- Provides higher profit margins: Due to lower overhead expenses, online stores offer higher profit margins. Businesses can focus their returns on increasing digital sales. For example, brick-and-mortar retailers often experience profit margins as low as 0.5%, while online retailers often exceed 4.5%.
3 Cons to a Digital Store:
- Limits customer connection: Digital stores often lack the ability to effectively build their brand, reducing their connection to customers. This can result in lower sales, making it difficult for businesses to excel in today’s marketplace.
- Requires higher rates of return: Online retailers face a return rate of more than 20% compared to their brick-and-mortar counterparts, who experience a 9% return rate. This may be due to the fact that consumers who buy online do not have the ability to see, touch, or try on products.
- Attracts only those who prefer to shop online: Although online stores can market to a larger audience, they do not appeal to certain individuals. In 2019, Pew Research Center reported that only 90% of adults shop online; 10% rely solely on physical stores. This includes people over the age of 65, those with low household incomes, and those who live in rural communities.
How Technology Can Enhance Both Physical and Digital Stores
To combat the challenges they face, both physical and digital stores have turned to technology. Companies have developed unique solutions to help streamline processes and increase revenue.
Technologies that Enhance Physical Stores
Innovative companies such as Ombori Grid have developed various tools to help brick-and-mortar stores enhance their business models, ultimately improving the customer experience. Here are some of its solutions that are transforming the physical shopping experience today.
- Wayfinder is an interactive, voice-activated map that helps customers find what they are looking for within a location. It accelerates the customer journey while increasing customer satisfaction. Wayfinder also helps increase customer loyalty, reduce lost sales, improve staff productivity, and provide real-time data to improve operations.
- Signage Playlist provides new ways for businesses to communicate with visitors. The Ombori Grid Digital Signage Playlist makes it easy for businesses to create and manage content. Digital signage also enhances visitor engagement, increases revenue, reduces production and maintenance costs, and provides customer interaction data, allowing management to determine what content is most effective in promoting sales.
- People counters are used to tally the number of individuals entering and exiting a specific location at any time. This technology helps businesses meet occupancy regulations, make data-driven decisions, optimize staff planning, and increase revenue. Businesses can understand what times are busiest and ensure proper customer flow, improving the overall shopping experience.
Technologies that Enhance Digital Stores
For businesses focusing on digital stores, Ombori has created web-based technologies to improve operations and the online customer experience.
- Queue Management software leverages virtual queues for the checkout process. Commonly used to reduce lines in physical locations, queue management software can also be used to streamline and provide transparency in the customer checkout process during an e-commerce experience. This tool is especially useful for improving customer service, allowing people to speak with staff when necessary.
- Appointment Booking software enables customers to schedule appointments online for both in-store and digital services. For example, tech companies (think Apple!) can use appointment booking to help customers schedule times to activate specific products.
Adopting an Omnichannel Approach
Both queue management and booking appointment systems can be used to help businesses adopt an omnichannel retail approach. Customers can commence their shopping journey online and complete the process in-store. Omnichannel refers to integrating different shopping methods for consumers – it involves combining digital and physical platforms.
Omnichannel shopping has become a dominant tool for businesses to meet today’s consumer demands. Companies such as Starbucks, Crate and Barrel, REI, and Timberland have all adopted an omnichannel approach to retailing, and their financial results have been profitable.
Due to ongoing consumer demands, companies have developed innovative technologies to help guide this new approach. Ombori Grid offers various solutions to help businesses bridge the physical and digital worlds.
- Guided Selling uses kiosks to personalize and improve the customer experience. Placed within a physical store, kiosks use guided sales software to collect data regarding customers’ wants and needs and then educate them on which products best suit them. Customers can use the technology to locate items within the store via Wayfinder, or they can choose to purchase products using the kiosk. If they select the latter, they can pick up the items in-store or ship them directly to their home.
- BOPIS and BOPAC allow customers to shop online and pick up their items at a specific location. BOPIS refers to “buy online pick up in-store,” while BOPAC refers to “buy online pick up curbside.” Both permit shoppers to purchase items online – view and select inventory and then checkout. Customers can choose how they want to retrieve their items – in-store or curbside – and do so at their convenience.
The past two years have been transformative for both physical and digital stores. Many retail strategies that worked in 2019 stopped working in 2020 when companies found themselves in the unthinkable position of telling consumers to stay home. The COVID-19 pandemic led many companies to adopt online solutions to retain customers. While people appreciate the flexibility and convenience of digital stores, they still want the ability to test products in physical stores and prefer an omnichannel approach.
Thanks to today’s technology, shoppers can enjoy the best of both worlds – physical and digital. From mobile apps to in-store displays and digital fitting rooms, companies need to provide a seamless experience for customers as they jump from one platform to another.
Björn is Chief Experience Officer of Ombori Grid. He spent the early part of his career in the music business before moving into retail design and video production. His passion is for creating unique and memorable retail experiences that excite and delight customers. He spent 6 years at Visual Art in Stockholm before joining Ombori in 2018.